“[Florida’s] legal environment has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then file tens of thousands of lawsuits against insurance companies that deny or dispute the claims,” the report says of the misuse of the policyholder protection known as AOB.

Michael Carlson, president of the Personal Insurance Federation of Florida, said the I.I.I. study underscores the global problem with AOBs in Florida, and highlights the “pernicious effects of our one-way fee law on our justice and insurance systems.”

“It is well past time for the [Florida] Legislature to fix this problem,” he said, noting a bill addressing attorney fees – Senate Bill 122 – has already been filed for 2019 Florida Legislative Session, which begins in March.

With rates rising and insurers pulling back in parts of the state where the abuse is most rampant, such as in South Florida, insurance leaders say the crisis must be addressed.

“The key issue at OIR [Office of Insurance Regulation] is the issue of AOB,” Florida Insurance Commissioner David Altmaier told attendees at the Florida Chamber of Commerce’s annual Insurance Summit in November. “It is an excessive litigation issue driven primarily by a loophole in the attorney fee statute … [it] is being used to the detriment of consumers.”

Carlson said the key issue for the insurance industry “has always been the perverse incentive to game the system that is created by the one-way attorney fee law, which was intended to benefit specific categories of insureds, not any assignee.”

In previous sessions, bills to reform the statute have failed thanks to lobbying by the trial bar. But the industry is hopeful 2019 will be different.

“I believe that there is real interest in the Senate to finally and meaningfully address the AOB crisis that is hurting consumers in Florida,” Carlson said.

CFO Jimmy Patronis said Citizens Property Insurance Corp.’s filing for an 8.2 percent rate filing largely because of litigation and losses from AOB is evidence of why reform needs to happen this year for the sake of consumers.

“We need to bring everyone to the table—that includes insurers, attorneys, contractors, and state leaders—to find the best solutions to addressing this mounting problem,” Patronis said in a statement.

Georgia

A new commissioner is now heading up the Georgia Department of Insurance, and he has promised bring changes to the department. Jim Beck, a Republican, was elected in November, taking over for Ralph Hudgens, who served since 2011. Beck was a former deputy insurance commissioner and also served as Hudgens’ chief of staff.

Beck has said his top priorities will be fixing health care, defending seniors and veterans from insurance fraud and protecting consumers from “runaway” auto rates.

“I will organize and begin holding tele-town hall hearings on all proposed excessive rate increases, and if appropriate, challenge them in court,” he said.

Thanks to a law passed in 2008 that promised to lower insurance rates, Georgia’s top insurance regulator cannot reject insurance rates filed by auto insurers unless they are seen to be overly excessive. The “file and use” system, however, may have backfired with Georgia now leading the U.S. when it comes the cost of auto insurance, according to S&P Global Market Intelligence.

President of the Professional Insurance Agents (PIA) Southern Alliance Jerry Duke said the association, which also represents Alabama and Mississippi, said it plans to provide its members with accurately calculated passenger auto rates, which could include support for a return to some form of prior approval.

“PIA has always taken the approach that the Commissioner had the power to review,” Duke said. “We will work with Commissioner Beck on something going forward.”

Duke said the association also plans to work closely with Beck on cyber insurance regulation that clarifies responsibility and assigns company agency responsibility.

The state also has a new governor, Brian Kemp, also a Republican. The 2019 session began Jan. 14.

North Carolina

The 2019 North Carolina legislative session will begin on Jan. 30. There will be plenty of insurance industry representation, thanks to the election of several independent agents to the Senate and House.

Sen. Jim Burgin, Sen. Todd Johnson, and Sen. Vickie Sawyer, who are also members of the Independent Insurance Agents of North Carolina (IIANC), were elected in November. Rep. Kevin Corbin, also an IIANC member, was re-elected to his second term in the North Carolina House of Representatives.

The association said Allstate agent Chris Humphrey also won his State House race and agents with IIANC member agencies – House Majority Leader Rep. John Bell and House Rules Chair Rep David Lewis – also won their re-election efforts.

Joe Stewart, vice president of Government Affairs for IIANC, said a hands-free driving law similar to what was passed in Georgia is a priority. Cybersecurity will likely come up again in some legislative form, as will flood insurance.

“With this many independent insurance agents now in the General Assembly, there’s a greater critical understanding of these issues in the body, so that makes me feel there’s a greater opportunity for discussion of these topics in 2019,” he said.

Tennessee

Tennessee has been enjoying lower workers’ compensation rates, competitive auto and homeowners markets and a booming captive industry for the last several years.

Moving forward into 2019, Insurance Commissioner Julie Mix McPeak says the new administration of Governor-Elect Bill Lee, who just reappointed her as commissioner, will help determine what the department’s legislative priorities will be, but she expects that health insurance will be at the top.

“Certainly, maintaining competition in our health insurance market – that’s been a big focus in Tennessee for my time here. We want to remain focused on that. Also, our new administration is very interested in efficiency of licensure, and we do a lot of things at commerce and insurance besides just insurance, and so I think that’s going to be a large focus of ours going forward as well,” she said.

McPeak says she is working on enhancing the state’s flood insurance market, encouraging more people to buy coverage and pushing Congress to reuathorize the federal flood program long-term.

“We have asked all of our members to reach out to their congressional delegations and talk about the importance of the long term reauthorization, and also [worked with] the states that are interested in creating a private market solution,” she said.

Kentucky

The Kentucky Legislature convened for 2019 on Jan. 8, and the Insurance Institute of Kentucky says it has several initiatives it will pursue in the short 30-day session.

According to Mark Treesh, executive director, IIKY will offer a more limited personal injury protection (PIP) bill than what passed the Kentucky Senate last year but was later dropped by the House. The proposal is to use the workers’ comp fee schedule for PIP medical payments. “Our hope is that a fee schedule will rein in some of the fraudulent activity rampant in [the state],” Treesh said.

IIKY is also working on insurance fraud, especially PIP fraud that is a real problem in Jefferson County (Louisville). “The provisions that we hope to bring are enhancing the criminal penalties for insurance fraud, eliminating contact information from accident reports purchased in bulk, and requiring medical licensing boards to report provider activity that may be insurance fraud to the Department of Insurance,” he said.

IIKY is also working to support asbestos trust transparency and an industry response to the American Law Institute’s “Restatement of the Law” – which covers a range of liability insurance law topics.

State-by-State Info

Alabama

Governor: Kay Ivey (R), won election 2018

Insurance committees: House Insurance; Senate Banking & Insurance

Insurance commissioner: Jim Ridling (non-partisan), appointed 2011. Has 50 years of experience in insurance, including positions with Fireman’s Fund.

Georgia

Governor: Brian Kemp (R), elected in 2018.

Insurance committees: Insurance & Labor Senate; Insurance House

Insurance commissioner: Jim Beck (R), elected 2018. Has 30 years of experience in the industry, including with an insurance agency, and a director for an insurance company. Formerly deputy insurance commissioner.

Kentucky

Insurance Commissioner: Nancy Atkins (non-partisan), appointed 2017. Has 33 years of experience in the insurance industry, including as an agent and employee benefit manager. Formerly worked for Kentucky department and for Blue Cross Blue Shield.

Mississippi

Governor: Phil Bryant (R), re-elected in 2016

Insurance committees: House Insurance; Senate Insurance

Insurance commissioner: Mike Chaney (R), elected to three terms since 2007. Former state legislator, Chaney is also active in the NAIC.

South Carolina

Insurance commissioner: Raymond G. Farmer (non-partisan), appointed 2012. Has more than 40 years’ experience in insurance. Served as Deputy commissioner for the Georgia Department of Insurance. Also with American Insurance Association.